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Larson Manufacturing v. Western Showcase Homes, Inc.

United States District Court, D. South Dakota, Southern Division

March 8, 2017

LARSON MANUFACTURING COMPANY OF SOUTH DAKOTA, INC., SUPERIOR HOMES, LLC, Plaintiffs,
v.
WESTERN SHOW HOMES, INC., AMERICAN MODULAR HOUSING GROUP, LLC, AMERICAN MODULAR HOUSING GROUP, INC., PAUL THOMAS, Defendants.

          ORDER DENYING DEFENDANTS' MOTION TO FILE THIRD-PARTY COMPLAINT DOCKET NO. 13

          VERONICA L. DUFFY United States Magistrate Judge

         INTRODUCTION

         This matter is before the court on the basis of diversity jurisdiction, 28 U.S.C. § 1332, after defendants removed the matter from South Dakota state court. See Docket No. 1, 1-1. Defendants now seek permission to file a third-party complaint adding claims against six new third-party defendants. See Docket No. 13, 13-1. Plaintiffs oppose the motion. See Docket No. 15. The court denies the motion for the following reasons.

         FACTS

         The following facts are taken from plaintiffs' amended complaint. The recitation of these facts should not be interpreted as the court's imprimatur of the verity of the facts. Rather, they are recited to frame the claims in order to evaluate defendants' pending motion.

         Plaintiff Larson Manufacturing Company of South Dakota, Inc. (Larson) is the parent company of plaintiff Superior Homes, LLC (Superior). See Docket No. 1-6 at 4. Both are South Dakota business entities. Id. Superior is in the business of manufacturing and selling modular homes. Id.

         Defendant Western Showcase Homes, Inc. ("Western") is a Nevada corporation in the business of purchasing, reselling, and financing modular homes. Id. at 5. Defendant Paul Thomas, a Nevada resident, is the sole member of American Modular Housing Group, LLC (AMHG, LLC), a Nevada company in the business of buying and reselling modular homes. Id. American Modular Housing Group, Inc. (AMHG, Inc.), is a Canadian corporation with its principal place of business in Nevada that also buys and resells modular homes. Id. Thomas is the principal agent and owner of both AMHG entities. Id.

         The defendant entities would purchase modular homes from Superior and then re-sell those homes to customers, sometimes arranging for delivery, set and completion of the home at the customer's location. Id. Larson and Superior extended credit to the defendant entities for these purchases; AMHG would then repay the loans when its customer paid the defendant entities. Id. at 6.

         The complaint recites that defendant entities placed orders for 26 modular homes with plaintiffs. Plaintiffs constructed the homes. Of the homes that were delivered to defendants, full payment was never made although the complaint alleges the ultimate customers who received these homes paid defendants. Other modular homes ordered by defendants were custom-built and never delivered because defendants never paid for the homes. As to the homes plaintiffs retain possession of, plaintiffs allege the custom nature of the homes makes resale of the homes at a reasonable value impracticable.

         In addition, Larson entered into a loan agreement with Western which was guaranteed by AMHG, Inc. This loan agreement ultimately encompassed $14 million in funds. Larson alleges that Western defaulted on the loan and AMHG, Inc. refused to pay pursuant to its guarantee. For all these matters, plaintiffs assert eight counts of breach of contract, five counts of unjust enrichment, two counts of tortious interference with business expectancy, three counts of fraud, two counts of conversion, one count each of debt and guarantee, and one count of piercing the corporate veil.

         Defendants generally deny nearly all of plaintiffs' allegations in their amended complaint. See Docket No. 6 at 1-16. In addition, defendants assert five counterclaims against Larson and Superior. Id. at 17-27. Those counterclaims include breach of contract (failure to pay rebates, failure to pay personal loans from Thomas); unjust enrichment (rebates, warranty and service fees); tortious interference with business expectancy (Aspen Links Country Club, Aspen Village Properties, and Waugh Who Developments); breach of contract (manufacturing defects in modular homes); and fraud and deceit (fraudulent inducement to sign a mortgage in connection with Aspen Village and McKenzie Lane, assignment of mortgage interest in Moose Ridge). See Docket No. 6 at pp. 17-27. Defendants seek compensatory and punitive damages on their counterclaims, pre- and post-judgment interest, attorney's fees, and other remedies. Id. at 27.

         Defendants now seek to file a third-party complaint pursuant to Federal Rule of Civil Procedure 14(a)(1). See Docket No. 13, 13-1. That third-party complaint, if allowed, would add the following parties: William Retterath, Greg Jahnke, Rylan Waugh, Aspen Village Properties, Ltd., Mauri Gwyn Development, Ltd.; and Waugh Who Developments, Ltd. as parties. Id. at 1. Five of the six new parties defendants seek to add are citizens and residents of Canada. Id. at 2-4. The third-party complaint would assert a claim of tortious interference with contract or business expectancy against all the new parties. Id. at 5-7. It would assert claims of defamation against Jahnke and Retterath. Id. at 7. It would assert claims of breach of contract against Aspen Village, Mauri Gwyn, and Waugh Who. Id. at 8-10. And it would seek punitive damages against Retterath. Id. at 10.

         Retterath is the only proposed new party who is a resident of the United States. Id. at 2-3. He is the Chief Financial Officer of plaintiff Larson and resides in Brookings, South Dakota. Id.

         Plaintiffs oppose defendants' request to file the proposed third-party complaint. See Docket No. 15. They assert Rule 14(a)(1) does not authorize defendants' third-party complaint. Id. at 1-5. Plaintiffs also assert they would be ...


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